David Loevinger told a conference in Shanghai that the congress of the
Chinese Communist Party this fall may not permit much progress on trade policy
with China.

He said the US needs to be more sensitive to the public pressure it puts on
China and that private discussions are more fruitful.

"Now is not the time for bold economic reform (for China), now is not the
time to take on strong domestic vested interests," he said. "Because of a strong
political calendar this may be the year that we may be less able to deliver, for
us."

He added that the US side is under great pressure to deliver because it is
itself under political pressure back home.

Earlier this month, Treasury Secretary Henry Paulson played down expectations
for any big breakthroughs in upcoming talks with China but said he was looking
for possible short-term progress.

The US and China held the first "Strategic Economic Dialogue" in December in
Beijing and the second round of talks is set for Washington on May 23 and 24.

Paulson will head the US team and China's delegation will be led by Vice
Premier Wu Yi.

Loevinger said the exchange rate is still at the top of the agenda in talks
with the Chinese leadership. He added that the US does not have a target for the
appreciation of the yuan.

"We still think that the exchange rate is the linchpin to adjusting a lot of
these macroeconomic imbalances," Loevinger said. "Imbalances in the Chinese
economy are large and rising."

Chinese Expert: Natural to Have Disputes

Next week's
Sino-US Strategic Economic Dialogue comes at a critical time because the Bush
administration is under increasing pressure from the Democratic Party-controlled
Congress to sort out its trade disputes with China, a Chinese expert said
yesterday.

"The Bush administration has been trying to ward off domestic pressure on
trade disputes with China. But it seems to have stopped doing so recently in the
face of mounting pressure from the Congress and the American people," Shi
Yinhong, director of the Center for American Studies of the Renmin University of
China, said.

The heating up of the presidential campaign has added to the pressure on Bush
before the second round of the dialogue, scheduled for May 22-23 in Washington.

The world has become so interdependent that it's natural for the two big
economies to have economic disputes, Shi said.

"The point is not about trying to find a problem-free economic environment;
it is about looking for a channel to divert these disputes and clear our
misunderstandings."

"Disputes can arise at any place, but the Strategic Economic Dialogue, (along
with dozens of other talks), provides such a channel for officials and ordinary
people in the US and China to exchange views and make some compromises," he
said.

Currency exchange rate, intellectual property rights and market access to
China are expected to be on top of the US agenda, Shi said. But it's unrealistic
to expect any breakthrough in these areas.

No breakthrough, however, doesn't mean failure or that high-level officials
should not be present at such meetings.

It can be considered fruitful if they can make some progress in those areas
because even a small progress can relieve the pressure on the Bush
administration, he said.

China understands the pressure Bush is facing, and has done a lot to help
relieve it. But there's no reason for it to be blamed for that, he said.

To go with the world's existing economic environment, China has adopted a
"managed floating exchange rate", and the yuan has already appreciated 5.4
percent since 2005.

The yuan became more flexible recently and is expected to be more
fluctuating, said Zhao Xijun, a professor in the School of Finance of Renmin
University of China.

"The increase in federal reserves and trade surpluses and flow of foreign
capital into the Chinese stock market have increased the pressure on the
government to appreciate the yuan further," Zhao said.

To solve the problem of the trade surplus, China has been working to adjust
its trade imbalance and currency rate both, he said.

The complaints and demands of our trade partners such as the US are often
based on their own political or industrial considerations, Zhao said.

Premier Wen Jiabao has made it clear China has already set the course of its
direction for the exchange rate reform, but it must be based on China's domestic
situation.